A speedboat can turn around in seconds, while the
captain of an ocean liner takes minutes, if not over
an hour, to make the same turn. Stock markets can
markets tend to respond over much longer periods
of time.
The stock market has taken a hit and seen some
recovery; whereas real estate markets have seen a
slowdown in pending home sales with no sign of a
return to normalcy. With countless businesses shut
down, and millions more out of work, the ripple
good news for most market sectors. All disasters
have three stages: the assessment, the repair, and
the on-going phases. We are not only in the
assessment phase, but we are still in the stages of
assessing the assessment stage.
Ultimately, there are typically one of three types of
recovery; a short “V” recovery, a long “U” recovery,
or an “L” recovery. Having studied detrimental
conditions since the 1980s, for most markets, I tend
to expect a “V” market recovery where distressed
owners sell and drive the market down, followed by a
steep recovery. What makes this COVID-19
assessment stage unique is that some are
forecasting a “W” shape recovery. Somewhat
similar to the concept of seasonality in the real
estate market, some are predicting seasonal ups and
If COVID-19 remerges and the economy pauses
again, a “W” recovery is likely. No matter the type of
recovery, there is already some light at the end of the
tunnel. Having seen scores of real estate disasters,
I am often amazed how resilient the markets are, at
least in the long run.
RANDALL BELL
Randall Bell, PhD, MAI, is the author of Real Estate Damages, 3rd Edition, which is published by the
Appraisal Institute. He specializes in damage economics and valuation, including environmental,
expert in multiple courts. Dr. Bell founded the Landmark Research Group, LLC and led the real estate
damages practice at PricewaterhouseCoopers. Bell consulted on the World Trade Center; the Flight 93
crash site; Hurricane Katrina; the BP oil spill; the Bikini Atoll nuclear test sites; the Sargent Yokoi cave in
Guam; the San Bruno pipeline explosion; the Anniston, Alabama spill; the Heaven’s Gate mansion; the
Canadian Government UXO site; the O. J. Simpson crime scene; and many others.
42 | APPRAISAL BUZZ FALL 2020
Furthermore, at Landmark Research Group, we
compare events using the “Bell Disaster Index.” While
the Coronavirus has been a tough event on an
international level, compared side-by-side with two
other world-class disasters that successfully
recovered, there is reason to be cautiously optimistic.
In the commercial markets, those REITS and
landlords who have good management and proper
reserves, will go through this relatively unscathed. I
expect that capitalization rates will likely temporarily
surge about 2 points, again due to distressed sellers.
Distressed players will crumble fast, while blaming
the coronavirus; however, they were likely on thin ice
anyway. We may see the distress buyers, who often
want about a 20% discount, over the next two or
three months.
With the residential markets, February residential
sales were up over January and were surging overall
immediately prior to COVID-19. Canceled listings
have been nominal or low, compared to this time
volume and expect the market to regain momentum
in late 2020, I see a somewhat better picture. Many
markets are under-supplied, and the government
news, but there are also indications that pending
home sales have dropped substantially.
In the long-term, many companies are adjusting well
to working at home. There are many large questions
that remain, such as if this new, mass
work-from-home mentality will persist after
Overall, I’m optimistic, but this is not a good time for
the eager property owner to sell.
DISASTER INDEX